This invention relates to invoicing and bill paying processes and systems. More specifically it relates to financial data processing systems and, in particular, to accounts receivable billing and receipt and/or payment acceptance systems which utilize a return remittance document in combination with a customer initiated negotiable instrument, such as a bank check, for accomplishing the application of funds to account receivable records.
Typically, invoicing and bill paying processes are accomplished through a variety of manual procedures and automated systems; however, all incorporate a similar characteristic, namely the preparation and mailing of a periodic customer invoice or bill which includes a separate or detachable bill stub, or alternately, a package of periodic payment coupons, designed to be returned by mail by the recipient (payer) with an accompanying payment usually in the form of a bank check. Upon receipt by the payee or depository bank of the incoming remittance envelope, the contents are examined, sorted and, if acceptance criteria are met, the two documents (bill stub or coupon and check) are physically compared by manual or automated means, and appropriate data is extracted and records are generated. One record is used to apply the funds to the payee's accounts receivable. An additional record prepares the bank check for deposit at a financial institution for processing the check through the check clearing network for application to the payer's account at a financial institution and ultimately returned as a cancelled check to the payer with the monthly checking account statement to allow the payer to reconcile the checking account and be used as proof of payment, if needed. This check clearing process requires the amount of the check to be encoded with a machine readable code by manual or automated means by the depository financial institution preparatory to the clearing process.
The above method of processing is widely used for routine household bill paying for a variety of products and services. Typical uses are credit card payments, mortgage and installment loan payments, utility payments and insurance premium payments. The public (corporations and individual consumers) has accepted this method of processing and this bill payment method has become a routine procedure in most households and companies.
These processing systems, however, have certain disadvantages. For example, the labor intensive, manual processes that must be performed in combining the two types of documents (bill stubs and checks) that are necessary to properly create the application records generate many problems (called "exceptions"). Some of the problems involve a check without an accompanying remittance document, a remittance document without an accompanying check, incorrect payee, stale-dated or post-dated check, incorrect payment amount, multiple documents of either type, restrictive notations, unidentified payee, cash payments and third party checks. Each of these problems requires manual decisions, special handling, and costly labor intensive processes. Even without these problems, the proper combining of the two documents results in duplicate, redundant processing steps such as microfilming, control total generation, reconciling steps, and dual audit trails. Consequently, this method of processing is expensive, time consuming and error prone.
Corporations that perform this type of processing absorb the highest portion of these costs and have been experimenting with alternative methods such as electronic remittance processing. The Automated Clearing House (ACH) process is one type of electronic payment system. Typically, the customer initiates a request to the corporation to electronically charge the customer's checking account for the exact payment on a predetermined date each payment period. Electronic transfers are made at that time crediting the customer's payee's accounts receivable and debiting the customer's checking account at the appropriate financial institution. While this process is quite automated, consumer acceptance has been minimal and it has not been successful on a national scale. As a result, the volumes are low and corporations must be equipped to process in both the electronic and the more expensive paper based modes which in turn result in overall higher costs. Customers, in general, have not accepted the electronic method of payment because they recognize that they do not control the timing and amount of the payment, have no receipt and are unfamiliar with procedures to initiate stop payments, to change financial institutions, or to discontinue the service.
Household bill paying procedures in certain European countries utilize a single document process called a "GIRO". It is essentially a bill or invoice which includes a return portion to effect a funds transfer. The payer authorizes payment by signing the return stub and indicating the payment amount, and returning that portion to the issuer or to a central processing service. Funds are transferred upon receipt of the document. The accounts receivable is credited, and the payer's depository funds are debited.
In THE GIRO method, the return portion is not a negotiable instrument and does not provide the payer nor the payee the legal protection afforded under the Uniform Commercial Code. The major differences between the check clearing process and Federal Reserve System in the United States as compared to those in a European country do not allow a GIRO system to operate within the United States. This coupled with the "central bank" concept in Europe verses the large number of United States commercial banks, savings banks, savings and loan associations and credit unions (over 16,000) which provide Demand Deposit Accounts preclude the use of the GIRO process in this country.
An automated system which would incorporate the essential elements of the current two documents used in conventional remittance systems into a single document thereby reducing the time, the labor, the documents processed, the correction procedures needed to resolve errors, and the resultant expenses of such processing is and has been desirable. Moreover, such an automated system that should preserve the characteristics and integrity of the bank check would provide the consumer and financial institution with an unquestionable high level of acceptance and widespread use, as well as significant economic gains. Such an automated system is the purpose of this invention.